Financial stocks took a beating on Friday on reports of federal scrutiny at
American International Group
and weak economic data.
Cleveland-based Nat City plunged to an all-time new low of $4.75 after
The Wall Street Journal
said the bank had agreed to a memorandum of understanding with the OCC. This informal action is taken when the regulator believes a bank needs to take certain steps to stabilize it. The next step would be a cease-and-desist order. More recently, the stock was trading down 8.1% to $4.91.
AIG slipped 6% to $34.22 on news that the Securities Exchange Commission was investigating the company on its valuation of credit default swaps, contracts that insure against defaulted debt. The
said that the SEC was looking into whether the insurance giant had overstated the value of contracts such as credit default swaps backed by subprime mortgages.
Financial stocks also suffered from a dismal jobs report, as the Labor Department said that unemployment had reached 5.5% -- the biggest monthly rise since 1986. The
Financial Sector Index declined 260.65 to 7,053.05, a loss of 3.6%.
Also hitting 52-week lows on Friday were banking giants
. Both raised capital in April and both have been subject to negative reports by analysts. Concerns over troubled loans and earnings going forward, coupled with active regulators sent the stocks tumbling. WaMu tanked 13.5% to $7.45 and Wachovia slid 6.6% to $20.17.
After the market closed on Thursday,
Bank of America
received approval from the
for the acquisition of
. Mortgage lender Countrywide was hit hard by the mortgage meltdown and BofA stepped up to buy the company, but concerns have arisen of late that the deal may not go through under its present terms. BofA shares slipped 3.5% to $30.86. Countrywide was only losing 2.5% $5.16.
was losing 31 cents to $33.54 after
The New York Post
suggested the investment firm may report its earnings early as it tries to convince investors that it is a stable company. Lehman has been the target of hedge fund manager David Einhorn, who has a short position on the stock. Einhorn has laid bare the weaknesses of the investment house, while Lehman fights off the negative statements.
became the proud owner of 83 properties in Iowa after a builder defaulted on the loan. The bank's stock slipped 6.6% to $15.45, as bad news in the real estate sector continues to build.
After the market's close on Thursday,
Standard & Poor's
cut bond insurers
to a double-A rating. Investors are concerned that the companies will not be able to attract business as a result of the downgrades to their once pristine credit and shares of both sold off on Friday. MBIA fell 8.9% to $5.50 and Ambac was giving back 8.8% to trade at $2.39.